"Smart" Energy Management for China's Transmission Grid

This effort would include accelerating efforts to achieve the goal of reducing China's energy consumption per unit of GDP by a cumulative 20% by 2010. One very promising approach for China to build energy conservation into its infrastructure is the construction of a "smart grid."

The "smart grid" is the merging of electricity infrastructure with information technology. The purpose is to add monitoring, analysis, control and communication capabilities to any national electrical delivery system to maximize efficiency while reducing energy consumption. Creating a unified power grid and upgrading aging power systems will increase productivity, reduce carbon dioxide emissions and increase national security.

The Need for a "Smart Grid" in China

In 2002, China established five independent electricity generating companies and several transmission companies. The five generators have an equal share of the assets — China Huaneng, China Datang, China Huadian, Guodian Power, China Power Investment — and compete to sell electricity.

The State Grid Corporation of China (SGCC), the Southern Power Grid Corporation and the Eastern China Grid Corporation are among China's transmission companies. The largest utility in the world, SGCC serves 26 provinces and 1.08 billion people with a peak load of 343 gigawatts (GW) and total investment in grid construction valued at US $31.8 billion in 2007. China's second largest utility, China Southern Power Grid, is ranked 226th in Fortune Magazine's Global 500 listing with revenues exceeding US $30 billion.

Throughout China, the existing regional grids have weak interconnections between provinces and largely non-existent interconnections between grids. In order to solve this deficiency, the Chinese government has plans to create a unified national power grid network by 2020.

The plans include what is known as the "West-East Electricity Transfer Project," which requires the construction of three major west-east transmission corridors: North, Central and South. The transmission capacity of each corridor is expected to reach 20 GW by 2020. While planning for such major infrastructure investments, the government would be well-positioned to lay the foundation for "smart grid" capacity across the country.

The Eastern China Grid Corporation initiated a feasibility study of "smart grid" technology in October 2007. Shi Junqing, the General Manager of Eastern China Grid Corp. described the findings earlier this year. In terms of the large load on its grid, the assets that it has built into its system, the necessity of continuing to build out the network and the increasing environmental, safety, reliability and efficiency pressures that it faces, Eastern China Grid Corp. believes that the conditions are now ripe for it to put in place a smart grid system; to that end the company has established a goal of gradually putting in place the elements of a "smart grid" over the coming years.

International Collaboration on "Smart Grid"

Efforts to develop and deploy "smart grid" technology are underway across the globe, supported by industry coalitions such as the Energy Future Coalition and the GridWise Alliance in the United States, Smart Grid Europe, and Smart Grid Australia.

In the United States, for example, although the transmission grid is 99.97% reliable, brief power interruptions have cost the country nearly US $100 billion each year; apart from enhanced reliability, smart grids promise to increase efficiency of power distribution and usage, with corresponding savings in power and power consumption.

With respect to China, international cooperation that focuses on energy efficiency includes the efforts of the philanthropic arm of Google, which has awarded a grant of US $250,000 to the U.S. National Academies and the Chinese Academies of Sciences and Engineering to develop recommendations for U.S.-Chinese cooperation on renewable electricity - central to which is a focus on grid connectivity and energy storage.

The Joint US-China Cooperation on Clean Energy (JUCCCE), a non-profit organization that brings together international experts to accelerate the use of clean and efficient energy in China, has been selected by the Clinton Global Initiative to organize The China Smart Grid Cooperative. JUCCCE is positioned to raise US $770,000 to run this initiative in 2009 and has plans to partner with international companies such as Duke Energy and GridPoint to accelerate "smart grid" development in China.
 

This week (Nov. 10-11), JUCCCE is convening the JUCCCE Energy Forum in cooperation with the Energy Foundation and the National Development and Reform Commission. The JUCCCE Energy Forum will include a presentation on smart grids by IBM and will surely afford the opportunity to further the efforts of JUCCCE to engage the leadership in Beijing to urge the development of a plan to develop a smart grid in China.

Business Opportunities for Foreign Companies

Opportunities exist for foreign corporations to benefit from "smart grid" investments in China. In March, American-owned Composite Technology Corporation announced an order valued at approximately US $3.1 million for high efficiency conductors. In June, ABB Ltd., a Swiss-owned manufacturer of power-generation equipment, won a US $70 million order for power equipment from the State Grid Corporation for a high voltage DC (HVDC) transmission link in northeastern China to transmit 3,000 megawatts (MW) from Inner Mongolia to Liaoning Province.

Siemens recently announced an order from China Southern Power Grid Corporation to build the first 800-kV ultra high voltage DC system able to transfer 5000 MW of power to load centers on the southeast coast. In addition, IBM has developed products to implement smart grids that it is promoting throughout the world, including in China.

"Smart Grid" Accommodates Breakthrough Technology

The State Grid Corporation of China (SGCC) has plans to create a nation-wide electric-vehicle charging network with charging stations currently installed in Shanghai, Beijing, and Tianjin to name a few. It was recently announced that General Motors is collaborating with the SGCC to meet Chinese market demand for the Chevy Volt.

However, without aggressive investment in "smart grid" technology, this initiative may stumble as it attempts to expand across the country. The plug-in electric vehicle will depend on network improvements as much as today's car depends on petrol stations, which will require sophisticated appliances to communicate oscillations in energy supply and demand.

Exporting Smart Grid Technology to Other Asian Countries

In addition to creating a "smart grid" infrastructure, China also has the opportunity to export "smart grid" best practices. Recently it was reported that the State Grid Corporation of China won a US $3.95 billion bid for a 25-year contract to manage the Philippines' electricity grid (arguably the largest privatization deal in Philippines' history). A significant opportunity exists for China to collaborate with the rest of the world on investing in the grid of the future.

China is in a unique position to develop the world's most advanced power distribution network by adopting smart grid technologies as it further develops and enhances its power grid. The question is whether China is willing to take the lead and be at the forefront of the "smart grid" revolution that is surely the future of worldwide power distribution.

Lou Schwartz is president of China Strategies LLC, and publisher of the China Renewable Energy and Sustainable Development Report and the China Aluminum Industry Report. He has degrees in East Asian Studies from the University of Michigan and Harvard University where he studied Chinese language and literature, economics and law, among other disciplines. Lou also earned a J.D. from George Washington University Law School.

Ryan Hodum is an environmental and renewable energy professional who recently earned a Master of Arts in Global Environmental Policy from American University in Washington, D.C. with a focus on renewable energy utilization in China. He now works for David Gardiner & Associates LLC, a strategic consulting firm focused on climate and energy solutions. Ryan spearheaded the development of China Strategies' China Renewable Energy Interactive Map and the China Solar Map, which can be found on China Strategies' website.